More often than not, people invest to make money and buy-to-let property is no exception. While it’s a passion project for some, the majority of investors will be more interested in the returns. With the potential for both short- and long-term growth, property remains a popular investment vehicle. But exactly how much do you stand to make on your buy-to-let property?
Property investment company, Joseph Mews, discusses the opportunities that come with UK property and how much investors could make on their buy-to-let.
How much has property grown in 5 years?
Over the past two years, the UK property market has made history. According to the House Price Index, the average property price is currently sitting at £274,700 – its highest value in over 10 years.
It’s no secret that the pandemic catalysed the majority – if not all – of the property price growth over the last two years, with this momentum still bolstering the market. While the average property price has increased by more than £27,000 in the past year, prices have long been on an upward trajectory.
In the last five years alone, the average property price has increased by around 30% – equating to a rise of £59,000. It’s this consistent growth – combined with the resilience of UK market – that often makes property a valuable long-term investment.
For many investors, five years is enough time to build equity in their buy-to-let property, but generally speaking, the longer the holding period, the better. Over the last 10 years, the average UK property price has grown by nearly 65%, making today’s value £107,000 higher than it was in 2012.
However, the key to these returns is the holding period, which means you won’t be able to access these returns for 5 – 10 years. That said, it’s crucial to remember that during this period, you’ll also be receiving rental income.
With the average UK rent reaching almost £1,000, your annual gross yield has the potential to be as high as £12,000. This means that in a space of five years, your property could see up to £59,000 capital growth along with a gross rental yield of around £60,000.
Which cities have experienced the biggest increases?
Although most areas across the UK have experienced some sort of price growth over the past 10 years, certain towns and cities have seen bigger increases. Regardless of whether your financial plan focuses more on short- or long-term growth, knowing which locations offer the most competitive returns is crucial.
Before the pandemic, London had always been one of the most popular investment locations in the UK. However, the ripple effects of the ‘London exodus’ – catalysed by Covid-19 – continue to position regional cities as more attractive locations in comparison.
While London will always have the draw of being the UK’s capital city, the likes of Birmingham, Manchester and Derby are forecasting higher levels of demand and more importantly, more accessible property prices.
But which cities have experienced the biggest increases?
| City | Average Property Price | 10-Year Growth | Average Rental Yield |
| Birmingham | £206,500 | £83,419 (64%) | 5.30% |
| Derby | £180,966 | £63,351 (52%) | 6.07% |
| Leeds | £172,000 | £83,462 (60%) | 5.27% |
| Manchester | £232,500 | £96,408 (84%) | 5.17% |
| Sheffield | £192,362 | £72,776 (59%) | 4.45% |
| Liverpool | £164,550 | £55,005 (50%) | 5.23% |
| Newcastle | £177,877 | £48,518 (36%) | 5.10% |
| Leicester | £206,498 | £94,779 (79%) | 5.31% |
| Nottingham | £171,762 | £75,882 (78%) | 4.92% |
| Glasgow | £162,081 | £58,627 (55%) | 5.31% |
Generally speaking, the more affordable cities have seen the biggest price increases over the past 10 years, making them more attractive alternatives to the capital. Not only have these regional cities experienced comparable growth over the last decade, the forecasts for the next five years are just as promising.
Which locations will increase the most in the next 5 years?
According to JLL, the West Midlands and East Midlands are leading the way for price growth over the next five years. With the West Midlands set to see up to 19% price increases by 2026, bolstered by the UK’s second city – Birmingham, this will inevitably draw more investors away from London.
Similarly, the likes of Nottingham, Derby and Leicester are expected to cement the East Midlands’ position amongst some of the best investment locations in the UK. With 17.5% price growth forecasted over the next five years, there will be even more opportunities for capital appreciation.
While the North has always been a strong contender amongst property investors, these regions are set to see notably less capital growth in the next five years. By 2026, prices across the North West are expected to increase by 16.5%, whereas the North East is forecasting just 13.5% price growth in the same period.
Regardless of whether you choose stocks and shares or buy-to-let property, having an idea of how much you stand to make on your investment is key. Without this expectation, it can be more difficult to stick to your financial plan and ultimately, reach your financial goals.
As we have seen over the past five-ten years, property not only offers more potential for bigger capital gains, but it also provides a source of income in the meantime. Combined with promising forecasts for the next five years, investing in property is often the perfect addition to any portfolio – whether you’re searching for short- or long-term returns.
